Books like this are rare. Positioning themselves at a point of convergence for practice and academic theory, authors Schwartz and FrancioniIt have written an outstanding book on today's equity markets. They use liquidity as a motivator for a wide ranging discussion of the forces shaping modern equity exchanges.

Today, electronic exchanges are supplanting their physical predecessors. Rules intended to protect the interests of retail investors come into conflict with the need of institutional investors who are transacting in ever larger blocks. Despite their economic clout, institutions largely leave it to smaller investors to set prices. They do so by matching trades off-exchange, typically at exchange prices. They also do so by disguising their on-exchange trading. Authors Schwartz and FrancioniIt note that institutions want "transparent" markets, except when they themselves are trying to trade a large block of stocks!

Delving into developments on both sides of the Atlantic, the book compares order-driven and intermediated markets. How does continuous trading work? How do call auctions work, and why are they coming back into fashion? How do some exchanges blend both approaches? How does the interaction between market and limit orders contribute to transparency and liquidity? A chapter looks at regulation. Another takes up clearing and settlement.

Targeting a sophisticated audience, the book offers insightful discussions that will appeal to researchers but are relevant for practitioners. In this respect, the book is similar to Campbell, Lo and MacKinlay (1997), but with a focus entirely on the secondary market for equities. For institutional investors, traders, exchange officials, regulators, and researchers, this book is a must read.